Oil prices declines after Iran downplays an alleged Israeli strike

At 11:55 a.m. GMT, Brent futures had dropped 48 cents, or 0.6%, to $86.63. Down 38 cents, or 0.5%, to $82.35, was the most active U.S. West Texas Intermediate contract.

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Oil prices fell on Friday after previously rising by more than $3, indicating that Iran may be able to avert a possible escalation of hostilities in the Middle East by downplaying reports of Israeli attacks on its territory.

At 11:55 a.m. GMT, Brent futures had dropped 48 cents, or 0.6%, to $86.63. Down 38 cents, or 0.5%, to $82.35, was the most active U.S. West Texas Intermediate contract.

Under what sources called an Israeli attack, Isfahan, in Iran, heard explosions on Friday. Tehran, however, downplayed the event and said it had no intentions to retaliate, allaying fears that the conflict may escalate into a regional conflict.

“Whilst the initial spike in oil may have highlighted the initial fear of further escalation, we have seen both equities and crude reverse some of those preliminary moves,” stated Joshua Mahony, chief market analyst at Scope Markets.

Prices are expected to have dropped the most this week since early February, having dropped more than 4% since Monday.

“Events of the past week appear to be more about showing their willingness to act rather than actually seeking to incite a war …For markets this is a best case scenario”.

Investors have been progressively unwinding the risk premium associated with oil this week, having been keenly observing Israel’s response to the Iranian drone assaults on April 13. “The oil market is nonetheless concerned as there is too much oil supply at stake,” said Bjarne Schieldrop, commodities analyst at SEB Research.

The penalties on Iran’s oil exports, meantime, are hidden within an aid package that Congress is still working on for Ukraine. They target Chinese financial institutions’ purchases of Iranian petroleum as well as ships, ports, or refineries that handle Iranian crude.

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